Budget overruns in construction are practically a guarantee these days. Due to the complexity of construction projects, people frequently have unrealistic expectations for their success. It is simple to understand why keeping a project within budget is nearly impossible in this industry when you take into account the fact that clients enjoy making changes on the fly.

Construction estimates also make project management easier because you can be sure that the actions you are taking are in line with the budget and will advance the project’s completion without harming its financial position. Here are some things you should know about estimates and how to create one for your next project.

## How to Estimate Construction Projects as a General Contractor *Excel Spreadsheet*

## Why are accurate estimates important?

The following are some advantages of giving clients a precise estimate for a construction project:

**Acquire more projects**

Giving clients a precise estimate can aid in both customer retention and attracting new ones. A reasonable estimate can demonstrate to a customer that you value integrity and value their business. They might then think about hiring you for additional construction projects as a result of this. They could also tell other business partners who might need construction services in the future about their positive experience.

**Build integrity**

A construction company can strengthen the integrity of their business by giving its client an accurate estimate for the project’s completion. In order to help prevent potential discrepancies that might occur during the building process or in the final steps of completion, it is crucial to take into account any potential risk factors when creating your estimate. Most of the time, clients expect construction managers to give them a clear understanding of the projected costs of a project. Being open and honest gives customers the chance to develop a relationship of trust with the construction company throughout the development process.

**Save money**

You can prioritise costs to cut costs with a precise estimate for a construction project. This can help you estimate labor and material requirements as well as costs more precisely. It can also help prevent overspending on the project. Producing accurate estimates can also benefit long-term savings and revenue. Additionally, if you can assist your clients in saving money throughout the course of the project, they might be grateful to you.

## What is construction estimating?

Calculating an estimate for a construction project is known as construction estimating. Establishing a budget, deciding on the project’s components and scope, and computing the project’s costs are all common parts of an estimate. Researching the cost of labor, materials, and other potential construction-related costs is one way to do this.

Construction estimating is crucial because it helps determine the projected costs of a project, which benefits both the construction company and its client. This enables the construction company to staff the job appropriately, buy the right supplies, and devote the project’s required amount of time. Estimates also give clients the chance to plan for how long the project might take to complete and secure financing for the project.

## How to learn to estimate construction jobs in 7 steps

When learning how to give accurate estimates for a construction job, keep these seven steps in mind:

**1. Use estimation software**

Construction managers may find it advantageous to use estimation software to facilitate the creation of precise estimates. You can enter costs into a database using software so that it can calculate prices for you automatically in the future. You might also think about using accounting software to figure out costs and gather information that might be required to document expenditures. Be sure to investigate a software’s features to see if it meets your needs before implementing accounting or estimation software.

**2. Include the cost of materials**

Making a list of the materials you might need to finish the project is crucial when estimating the cost. Because you might buy materials in bulk, take into account the unit cost for the materials you intend to use. Doing so can help save money. You may also take into account the materials’ current supply and demand, as this may have an impact on their availability and cost.

**3. Provide detailed labor costs**

It’s crucial to include all potential labor expenses for the project in your construction estimate. The total pay, taxes, and benefits for all the employees or contractors you intend to use on the project can be included in this. Direct and indirect labor costs are two possible divisions of labor costs. While direct labor costs are the wages you pay the people finishing the project, indirect costs include fees to facilitate its production.

**4. Consider the risks**

You might take into account setting aside money for any unanticipated events in your quote when figuring out the construction costs of your estimate. This could include potential risks to one’s safety or possible labor shortages during the project. Incorporating site or weather conditions, potential increases in material costs, or a client-driven project change is also crucial. You could also factor the possibility of theft or tool or equipment damage into your estimate.

**5. Decide a markup value**

It is advantageous to include a markup value in an estimate, which is the additional expense you intend to include with the unit costs in order to turn a profit. Although it is not required to disclose this markup value to customers, it is crucial to make sure that it is reasonable. If the markup is too high, clients might be reluctant to use your services while if it is too low, you might not make a significant profit from the project.

Here is a straightforward formula you can use to determine your markup if you decide to do it manually:

Selling Price – Cost to Produce = Markup

**6. Present estimate**

When presenting a construction estimate to a client, the type of estimate you provide may depend on the stage of the process you’re in. When giving a customer an estimate, there are four stages to take into account. These are as follows:

**7. Offer estimate clarification**

Provide clients with any clarifications they may need following the completion of each stage of your construction estimate. You can achieve this by responding to any inquiries they may have regarding specifics of the estimate or the project. Make sure to settle any disagreements before beginning construction.

## Best practices for estimating construction jobs

There are many methods you can use when determining a construction estimate for a potential client. Below, we explore best practices for estimating a construction project:

**Implement unit cost estimation**

The unit method employs a formula to calculate the overall cost of your estimate. The total cost of the project is determined by multiplying the number of units by the cost per unit. You can write this formula in the following way:

Total project cost = number of units x cost per unit

**Explore stick estimation**

Calculating each individual material unit and each hour of labor per unit is done using the “stick” method. Although it may take longer to calculate, this method can result in a more precise estimate. Consider implementing this method when working on smaller projects.

**Estimate manually**

Using a pencil and paper, a spreadsheet, or a calculator, you must figure out all costs related to your projects, including labor, materials, unit costs, and any other outlays. This can be helpful when you’re first learning how to estimate a client’s needs. Then, you could use a piece of software to verify that your calculations were accurate.

## FAQ

**How do I learn how do you estimate construction?**

**10 Steps for Accurate Construction Job Estimation**

- Get a Precise and Detailed Scope of the Project. …
- Use Stick Estimating to Gauge Costs. …
- Become Familiar With Calculating Costs by Hand. …
- Use Unit Cost Estimating for Speed. …
- Incorporate Estimating Software Appropriately. …
- Calculate Costs for Labor and Materials.

**Is construction estimating difficult?**

Estimating is one of the most difficult jobs in construction. It is also one of the most important. Typically, the accuracy of your projections and how closely they correspond to your actual project costs determine whether you’ll make any money at all.

**How do you estimate a contracting job?**

**How to price contractor jobs**

- Decide on your salary. Identifying the amount of money you hope to earn annually is the first step in determining the price of your contracting jobs.
- Establish your overhead costs. …
- Set a profit margin. …
- Know your billable hours. …
- Set your rate. …
- Review the competition. …
- Price out variable expenses. …
- Consider taxes.

**How long does it take to become an estimator?**

The Certification of Professional Estimators is a designation offered by the American Society of Professional Estimators. To earn it, candidates must have five years of experience, be proficient in technical writing and communication, complete a workshop, and pass an exam.